The Securities and Exchange Board of India (Sebi) may find itself on a tricky terrain over the government's nudge to change rules on related party transactions in corporates.
In a move towards promoting ease of doing business, the ministry of corporate affairs (MCA) has asked the regulator to tweak rules to make them at par with those under the Companies Act 2013. This has raised concerns among market participants about a dilution in Sebi's stand on protection of minority shareholders. Experts and shareholder advisory firms, which believe Sebi should hold its ground on the issue, will soon take up the matter with the regulator.
The MCA changed its stand on related party transactions in 2014, when it lowered the threshold for minority shareholder votes for listed companies from 75% to 50% for passing resolutions. It also allowed voting by 'related parties' while barring only 'interested parties'.